“So -- we already have an audit every year. Why do we need another one?”

“There are two answers to that question. The first is downright scary: the Texas Republican's proposal requiring audits of the central bank's interest-rate decisions is getting traction.”

Mish Reply:

If there is nothing to hide, why object?

Bear in mind there are many things the Fed does not report on but should. There is is no marked-to-market reporting of what is on the Fed’s balance sheet nor is there accounting for currency swaps to foreign central banks.

Moreover, Ron Paul explicitly put wording in his bill to not question the Fed’s interest rate decisions or monetary policy, and Ron Paul himself has concerns about the Fed's independence from politics.

Defending himself against critics, Representative Ron Paul of Texas played down continuing concerns on Friday that his amendment to give Congress sweeping new oversight powers over the Federal Reserve would compromise the central bank’s political independence. He asserted that the Fed was not truly as independent as it would like the public to believe.

“There is already a tremendous amount of political pressure on the Fed,” Mr. Paul, a libertarian Republican, told DealBook. “The Federal Reserve Board chairmen have notoriously been sympathetic to the presidents who might be reappointing them and there has been evidence to show that.”

Mr. Paul also asserted that the Fed was beholden to pressures beyond the government from special interests, including Wall Street. “It’s not like the banks and Goldman Sachs doesn’t have influence over the Fed,” Mr. Paul said. “Every time the Fed says it wants its independence, what they are really saying is we want to keep our secrets.”

Mr. Paul also said the amendment specifically barred Congress from intervening in any aspect of monetary policy and that any audits of the Federal Reserve’s decisions to raise or lower interests rates would be made available to Congress on a six-month time lag.

The Federal Reserve Transparency Act of 2009, H.R. 1207, simply directs the comptroller general (who heads the GAO) to complete an audit of the Fed system—the Board and regional banks—before the end of 2010 and report his findings to Congress.

Mr. Paul, in an interview, said he expects the audit to detail who the Fed lends to, how much it lends and what agreements it has with foreign central banks and financing organizations. Mr. Paul said he wants the Fed to be audited at least annually.

Sadly, many are swept up in the Fed hype without reading what the bill actually says or understanding the reason for it.

Should Anyone Question The Fed's Decisions?

Bondad goes on to say “The absolute last thing we need is for anyone to second guess the Fed's interest rate decisions.”

I strongly disagree. It is entirely correct to second guess the Fed’s interest rate policy. The reason is the Fed has done nothing but blow bubbles of increasing magnitude for decades.

It should be crystal clear to everyone that the Fed held interest rates too low, too long spawning off the world’s biggest credit bubble as well as the world’s biggest real estate bubble.

Amazingly, Bondad does not want anyone questioning Fed policy, no matter how bad it is. Apparently the Fed is God, who cannot be questioned or make a mistake.

There is a distinct difference between independence and secrecy. There is also a distinct difference between interfering in monetary policy and questioning monetary policy.

Suppressing comments is a dangerous thing, it's just a little thing called "freedom of speech". I have a right to question (second guess) Fed policy, and so does everyone else. It would be a sad day indeed for that right to be lost.

Sadly, Bondad, George Will, and others wittingly or unwittingly have become pawns for the Fed's power grab.

If Ron Paul succeeds in getting the Fed audited, the consequences could be far-reaching. Assuming the audit isn't rigged to protect the guilty, as a similar bill was in 1978, the Fed will need every obfuscating Keynesian to testify and write editorials on its behalf, to reassure the public that monetary matters really are best left to the gods who rule us, such as Ben Bernanke and Timothy Geithner. Monetarists, too, would likely join the "Save the Fed" crusade, perhaps arguing that even a great free market economist like Milton Friedman considered the Fed useful for preventing and curing recessions.

But the really appetizing part of auditing the Fed is knowing what stands behind it. The Fed is a racket at heart, a con game writ large — what else can you call an organization with the exclusive privilege of printing money in the trillions and handing it over to friends? But if this is true, what does that say about the state, the organization that created and sanctions it? Is the Fed an honest mistake in the state's otherwise undying efforts to preserve our liberty, or might it be a key component of a bigger racket?

Without the power of the state, there would be no proposal to audit the Fed because there would be no Fed to audit. Like any cartel, it exists to protect its members from market retribution, and only the police power of the state can make us shoulder that burden. A bill to audit the Fed could by force of logic become a state audit, much like the investigations of the 1972 Watergate burglary exposed the grinning skull behind the government's public persona. During a Fed audit, for example, would it not be reasonable to ask why the people's elected representatives continue to support a banking system that secretly steals wealth from their countrymen and other dollar holders? Or are we to take the naïve position that most elected officials really are clueless about the Fed's policy of currency debasement and the effects such policies have had in history?

Audit The Fed - Then Abolish It

The last thing we need is to give still more powers to the Fed. Instead we should get rid of it.

I do weekly podcasts every Thursday on HoweStreet and a brief 7 minute segment on Saturday on CKNW AM 980 in Vancouver.

When not writing about stocks or the economy I spends a great deal of time on photography and in the garden. I have over 80 magazine and book cover credits. Some of my Wisconsin and gardening images can be seen at MichaelShedlock.com .

Comments

Timothy Hanline, Jr.
17 Dec 09, 17:15

Abolish the Fed, Reform Banking

The Federal Reserve has committed a financial fraud upon the people of the United States, and in my judgment, the Federal Reserve should be abolished in toto, returning the responsibility to coin Money, regulate the value thereof, and of foreign Coin, and fix the Standard of Weights and Measures back to the direct oversight of the Congress per Article I section 8 of the United States Constitution.

The scope of power and sphere of influence of the private shareholders of the Federal Reserve has grown to magnitudes that are indeed ominous, and the authority of the Federal Reserve to print money and establish monetary policy outside the direct oversight of the Congress is, in my view, not only an egregious breach of the letter and spirit of the Constitution but also a vast, inevitably corrupting power for which there is, in my judgment, no feasible system of adequate checks and balances. For this reason, I believe the government should take corrective action to:

• Abolish the Federal Reserve,

• Compel by law the forgiveness of all debt owed to Federal Reserve and its shareholders,

• Establish restrictive laws for the banking industry described below.

In my judgment, banking and monetary laws must, in order to sustain a vibrant economy for future generations, be significantly reformed to be compliant with the ethics prescribed by our Creator as detailed in the Scriptures. Specifically, I favor amending the United States Constitution to incorporate reforms that should include but not be limited to the following.

• Per the mandate specified in Deuteronomy 23:19, 20, the law should disallow charging of interest on all loans made to citizens of the United States. Interest should be allowed on loans made only to foreign borrowers and borrowers who are not citizens of the United States.

• Per the mandate specified in Deuteronomy 15, a seven year financial cycle should be established at the end of which should be a forgiveness of all debts of the citizens of the United States.

These simple reforms will curtail the ability for banks to exact wealth from the people of the United States in the form of interest, which will compel all citizens to devote their efforts to the production of goods and services while living within their means. In other words, these reforms will curtail the ability of banks and other corporations and individuals to fraudulently extract wealth from their fellow citizens in the form of usury.

Furthermore, in my judgment, the practice of fractional reserve banking should be disallowed by law. Allowing the issuance of money that is not backed by goods is an ancient yet risky and fraudulent scheme, which inevitably leads to “bank runs” and financial insolvency. Fractional reserve banking fraud also empowers bankers to amass more wealth than they have rightly earned.

In summary, our laws governing finance and banking, indeed our Constitution should be changed to align with the mandates specified by our Creator as described in the Scriptures, which will facilitate a just and prosperous country for generations to come.

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